The Economy May Be Going Into A Phase That's A Complete Reversal Of The Last 3 Years

The recent weakness in markets — including today’s big 150-point decline — is pretty interesting because it comes right as several economists are cranking up their measures of economic momentum.

For example, here’s Nomura showing a big spike in economic momentum in September in the US.


Goldman is seeing similar green shoots.

It’s also well known that we’ve seen strides in the labour market, the housing market, and consumer confidence lately.

And there’s a good argument to be made that we’re finally going to see some wage growth.

And yet on the corporate side, what we see is this: By far the weakest quarter for earnings and revenue beats since the crisis.

revenue beats

Photo: Factset

Stocks have been rather saggy of late.

So here’s something that we’ve not seen anyone discuss: What if we finally start to see the domestic strength everyone’s been waiting for, right as the stock market picture deteriorates.

Since 2009, we’ve had the flipside of that: Weak labour, amazing stock market and corporate performance.

So the flipside is possible: Strong labour, strong wage growth, strong housing, mediocre stock market performance.

Is anyone predicting that?

Three other quick things to think about:

  • The market has been weakish ever since QE3 was announced. Cullen Roche has a good take on this.
  • The selloff in the US comes as people are getting more and more bullish about China’s prospects of improvement. The US has been a star out-performer for a long time. Eventually markets will switch places.
  • Corporate profits have been driven in large part by the deficit. A fiscal cliff hit could be bottom line murder.

SEE ALSO: Green shoots are popping up everywhere >

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